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Sako made 50 appearances for Palace from 2015-2018, but left at the end of last season when his contract expired and signed a one-year deal with second-tier club West Bromwich Albion.
But the 30-year-old Mali forward struggled at The Hawthorns, starting only three times, and Albion have agreed to release him from his contract so he can return to south London side Palace.
"I'm delighted that we've managed to bring Bakary back to Palace," manager Roy Hodgson said.
"He's a player with a huge amount of talent and as he showed when he was fully fit last year, he is able to provide a boost to our attacking options."
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